Download 0 Principles of Change Management Tools and techniques to help

0 Principles of Change Management
Tools and techniques to help companies transform quickly.
by John Jones, DeAnne Aguirre and Matthew Calderone
Way back when (pick your date), senior executives in large companies had a simple goal for
themselves and their organizations: stability. Shareholders wanted little more than predictable
earnings growth. Because so many markets were either closed or undeveloped, leaders could
deliver on those expectations through annual exercises that offered only modest modifications to
the strategic plan. Prices stayed in check; people stayed in their jobs; life was good.
Market transparency, labor mobility, global capital flows, and instantaneous communications
have blown that comfortable scenario to smithereens. In most industries — and in almost all
companies, from giants on down — heightened global competition has concentrated
management’s collective mind on something that, in the past, it happily avoided: change.
Successful companies, as Harvard Business School professor Rosabeth Moss Kanter told s+b in
1999, develop “a culture that just keeps moving all the time.”
This presents most senior executives with an unfamiliar challenge. In major transformations of
large enterprises, they and their advisors conventionally focus their attention on devising the best
strategic and tactical plans. But to succeed, they also must have an intimate understanding of the
human side of change management — the alignment of the company’s culture, values, people,
and behaviors — to encourage the desired results. Plans themselves do not capture value; value
is realized only through the sustained, collective actions of the thousands — perhaps the tens of
thousands — of employees who are responsible for designing, executing, and living with the
changed environment.
Long-term structural transformation has four characteristics: scale (the change affects all or most
of the organization), magnitude (it involves significant alterations of the status quo), duration (it
lasts for months, if not years), and strategic importance. Yet companies will reap the rewards
only when change occurs at the level of the individual employee.
Many senior executives know this and worry about it. When asked what keeps them up at night,
CEOs involved in transformation often say they are concerned about how the work force will
react, how they can get their team to work together, and how they will be able to lead their
people. They also worry about retaining their company’s unique values and sense of identity and
about creating a culture of commitment and performance. Leadership teams that fail to plan for
the human side of change often find themselves wondering why their best-laid plans have gone
awry.
No single methodology fits every company, but there is a set of practices, tools, and techniques
that can be adapted to a variety of situations. What follows is a “Top 10” list of guiding
principles for change management. Using these as a systematic, comprehensive framework,
executives can understand what to expect, how to manage their own personal change, and how to
engage the entire organization in the process.
1. Address the “human side” systematically. Any significant transformation creates “people
issues.” New leaders will be asked to step up, jobs will be changed, new skills and capabilities
must be developed, and employees will be uncertain and resistant. Dealing with these issues on a
reactive, case-by-case basis puts speed, morale, and results at risk. A formal approach for
managing change — beginning with the leadership team and then engaging key stakeholders and
leaders — should be developed early, and adapted often as change moves through the
organization. This demands as much data collection and analysis, planning, and implementation
discipline as does a redesign of strategy, systems, or processes. The change-management
approach should be fully integrated into program design and decision making, both informing
and enabling strategic direction. It should be based on a realistic assessment of the organization’s
history, readiness, and capacity to change.
2. Start at the top. Because change is inherently unsettling for people at all levels of an
organization, when it is on the horizon, all eyes will turn to the CEO and the leadership team for
strength, support, and direction. The leaders themselves must embrace the new approaches first,
both to challenge and to motivate the rest of the institution. They must speak with one voice and
model the desired behaviors. The executive team also needs to understand that, although its
public face may be one of unity, it, too, is composed of individuals who are going through
stressful times and need to be supported.
Executive teams that work well together are best positioned for success. They are aligned and
committed to the direction of change, understand the culture and behaviors the changes intend to
introduce, and can model those changes themselves. At one large transportation company, the
senior team rolled out an initiative to improve the efficiency and performance of its corporate
and field staff before addressing change issues at the officer level. The initiative realized initial
cost savings but stalled as employees began to question the leadership team’s vision and
commitment. Only after the leadership team went through the process of aligning and
committing to the change initiative was the work force able to deliver downstream results.
3. Involve every layer. As transformation programs progress from defining strategy and setting
targets to design and implementation, they affect different levels of the organization. Change
efforts must include plans for identifying leaders throughout the company and pushing
responsibility for design and implementation down, so that change “cascades” through the
organization. At each layer of the organization, the leaders who are identified and trained must
be aligned to the company’s vision, equipped to execute their specific mission, and motivated to
make change happen.
A major multiline insurer with consistently flat earnings decided to change performance and
behavior in preparation for going public. The company followed this “cascading leadership”
methodology, training and supporting teams at each stage. First, 10 officers set the strategy,
vision, and targets. Next, more than 60 senior executives and managers designed the core of the
change initiative. Then 500 leaders from the field drove implementation. The structure remained
in place throughout the change program, which doubled the company’s earnings far ahead of
schedule. This approach is also a superb way for a company to identify its next generation of
leadership.
4. Make the formal case. Individuals are inherently rational and will question to what extent
change is needed, whether the company is headed in the right direction, and whether they want to
commit personally to making change happen. They will look to the leadership for answers. The
articulation of a formal case for change and the creation of a written vision statement are
invaluable opportunities to create or compel leadership-team alignment.
Three steps should be followed in developing the case: First, confront reality and articulate a
convincing need for change. Second, demonstrate faith that the company has a viable future and
the leadership to get there. Finally, provide a road map to guide behavior and decision making.
Leaders must then customize this message for various internal audiences, describing the pending
change in terms that matter to the individuals.
A consumer packaged-goods company experiencing years of steadily declining earnings
determined that it needed to significantly restructure its operations — instituting, among other
things, a 30 percent work force reduction — to remain competitive. In a series of offsite
meetings, the executive team built a brutally honest business case that downsizing was the only
way to keep the business viable, and drew on the company’s proud heritage to craft a compelling
vision to lead the company forward. By confronting reality and helping employees understand
the necessity for change, leaders were able to motivate the organization to follow the new
direction in the midst of the largest downsizing in the company’s history. Instead of being shellshocked and demoralized, those who stayed felt a renewed resolve to help the enterprise
advance.
5. Create ownership. Leaders of large change programs must overperform during the
transformation and be the zealots who create a critical mass among the work force in favor of
change. This requires more than mere buy-in or passive agreement that the direction of change is
acceptable. It demands ownership by leaders willing to accept responsibility for making change
happen in all of the areas they influence or control. Ownership is often best created by involving
people in identifying problems and crafting solutions. It is reinforced by incentives and rewards.
These can be tangible (for example, financial compensation) or psychological (for example,
camaraderie and a sense of shared destiny).
At a large health-care organization that was moving to a shared-services model for
administrative support, the first department to create detailed designs for the new organization
was human resources. Its personnel worked with advisors in cross-functional teams for more
than six months. But as the designs were being finalized, top departmental executives began to
resist the move to implementation. While agreeing that the work was top-notch, the executives
realized they hadn’t invested enough individual time in the design process to feel the ownership
required to begin implementation. On the basis of their feedback, the process was modified to
include a “deep dive.” The departmental executives worked with the design teams to learn more,
and get further exposure to changes that would occur. This was the turning point; the transition
then happened quickly. It also created a forum for top executives to work as a team, creating a
sense of alignment and unity that the group hadn’t felt before.
6. Communicate the message. Too often, change leaders make the mistake of believing that
others understand the issues, feel the need to change, and see the new direction as clearly as they
do. The best change programs reinforce core messages through regular, timely advice that is both
inspirational and practicable. Communications flow in from the bottom and out from the top, and
are targeted to provide employees the right information at the right time and to solicit their input
and feedback. Often this will require overcommunication through multiple, redundant channels.
In the late 1990s, the commissioner of the Internal Revenue Service, Charles O. Rossotti, had a
vision: The IRS could treat taxpayers as customers and turn a feared bureaucracy into a worldclass service organization. Getting more than 100,000 employees to think and act differently
required more than just systems redesign and process change. IRS leadership designed and
executed an ambitious communications program including daily voice mails from the
commissioner and his top staff, training sessions, videotapes, newsletters, and town hall meetings
that continued through the transformation. Timely, constant, practical communication was at the
heart of the program, which brought the IRS’s customer ratings from the lowest in various
surveys to its current ranking above the likes of McDonald’s and most airlines.
7. Assess the cultural landscape. Successful change programs pick up speed and intensity as
they cascade down, making it critically important that leaders understand and account for culture
and behaviors at each level of the organization. Companies often make the mistake of assessing
culture either too late or not at all. Thorough cultural diagnostics can assess organizational
readiness to change, bring major problems to the surface, identify conflicts, and define factors
that can recognize and influence sources of leadership and resistance. These diagnostics identify
the core values, beliefs, behaviors, and perceptions that must be taken into account for successful
change to occur. They serve as the common baseline for designing essential change elements,
such as the new corporate vision, and building the infrastructure and programs needed to drive
change.
8. Address culture explicitly. Once the culture is understood, it should be addressed as
thoroughly as any other area in a change program. Leaders should be explicit about the culture
and underlying behaviors that will best support the new way of doing business, and find
opportunities to model and reward those behaviors. This requires developing a baseline, defining
an explicit end-state or desired culture, and devising detailed plans to make the transition.
Company culture is an amalgam of shared history, explicit values and beliefs, and common
attitudes and behaviors. Change programs can involve creating a culture (in new companies or
those built through multiple acquisitions), combining cultures (in mergers or acquisitions of large
companies), or reinforcing cultures (in, say, long-established consumer goods or manufacturing
companies). Understanding that all companies have a cultural center — the locus of thought,
activity, influence, or personal identification — is often an effective way to jump-start culture
change.
A consumer goods company with a suite of premium brands determined that business realities
demanded a greater focus on profitability and bottom-line accountability. In addition to
redesigning metrics and incentives, it developed a plan to systematically change the company’s
culture, beginning with marketing, the company’s historical center. It brought the marketing staff
into the process early to create enthusiasts for the new philosophy who adapted marketing
campaigns, spending plans, and incentive programs to be more accountable. Seeing these culture
leaders grab onto the new program, the rest of the company quickly fell in line.
9. Prepare for the unexpected. No change program goes completely according to plan. People
react in unexpected ways; areas of anticipated resistance fall away; and the external environment
shifts. Effectively managing change requires continual reassessment of its impact and the
organization’s willingness and ability to adopt the next wave of transformation. Fed by real data
from the field and supported by information and solid decision-making processes, change leaders
can then make the adjustments necessary to maintain momentum and drive results.
A leading U.S. health-care company was facing competitive and financial pressures from its
inability to react to changes in the marketplace. A diagnosis revealed shortcomings in its
organizational structure and governance, and the company decided to implement a new operating
model. In the midst of detailed design, a new CEO and leadership team took over. The new team
was initially skeptical, but was ultimately convinced that a solid case for change, grounded in
facts and supported by the organization at large, existed. Some adjustments were made to the
speed and sequence of implementation, but the fundamentals of the new operating model
remained unchanged.
10. Speak to the individual. Change is both an institutional journey and a very personal one.
People spend many hours each week at work; many think of their colleagues as a second family.
Individuals (or teams of individuals) need to know how their work will change, what is expected
of them during and after the change program, how they will be measured, and what success or
failure will mean for them and those around them. Team leaders should be as honest and explicit
as possible. People will react to what they see and hear around them, and need to be involved in
the change process. Highly visible rewards, such as promotion, recognition, and bonuses, should
be provided as dramatic reinforcement for embracing change. Sanction or removal of people
standing in the way of change will reinforce the institution’s commitment.
Most leaders contemplating change know that people matter. It is all too tempting, however, to
dwell on the plans and processes, which don’t talk back and don’t respond emotionally, rather
than face up to the more difficult and more critical human issues. But mastering the “soft” side of
change management needn’t be a mystery